Thanks for Sharing the insight. Jyothi CNC has applied for an IPO. Its product seems to be good and has 5 5-axis CNC machine. Is there any input from MacPower to enhance its portfolio? Also is there a data on how Indian customers prefer Indian CNC machines against Mazada(Japanese ones).
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Coming up with a new faclity for aerospace and defence which will be 4 times of current capacity.
Some rough calculation on Macpower CNC:
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Their average blended realization is 19 Lakh per machine which is likely to increase as they sell more high value machines (4 axis and 5 axis machines).
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Jyoti CNC (recent ipo) has an average realization of 27 Lakh.
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Macpower realization can also increase to 21-22 Lakhs.
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Hence at peak utilization, macpower can do 440 Crore of revenue (22 Lakh * 2000 Machines). I assume they can do the peak revenue by FY26.
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At 15% margins they can generate ebitda of 66 Cr (FY26) vs 21 cr in FY23
Now let’s look at the bigger picture
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The new facility will be 4x of current facility (i assume new facility will have the capacity of 8000 machines)
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Jyoti CNC has an order book of 3300 cr, primarily into Aerospace & Defence which required 4-5 axis machines.
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Jyoti CNC mentioned this new order book will have blended realization of 50 Lakh (as Aerospace & defence are a higher realization segments)
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Macpower’s new facility will also cater to aerospace & defence. I assume the blended realization for macpower will increase to 40 Lakh (assuming less then Jyoti).
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At peak utilization Macpower will be able to do the revenue of 4000 cr (10000 Machines * 40 Lakh).
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Assuming 20% margins due to operating leverage. It can do EBITDA of 800 cr.
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Even we estimate lower PAT growth then the EBITDA growth due to higher depreciation or interest cost.
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PAT can be 500-600 Cr (Current market cap is 700 Cr)
Now the only question is when?
Note: These are my rough estimates, actual estimates could be very different from this. I could be biased, please make any decision as per your analysis.
https://x.com/Alazyinvestor13/status/1744762935988384207?s=20
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https://nsearchives.nseindia.com/corporate/MACPOWER_29012024133306_InvestorPresentationforQ3FY24.pdf
The company continues to display good results. What makes me optimistic is the company’s focus on premiumisation and debt-free status
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Macpower Q3FY24, another stellar quarter.
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Order book increased to 236 crore from 148 crore QoQ.
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Realization will be above 20 Lakh
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Q4 is the strongest quarter
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Strong demand for various CNC machines
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India required 30k machines today. Few companies outside India are doing more then 30k machines (single company). eg. Foxcon has 2.5 Lakh machines in China
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Entry barriers are huge. To make one machines you required 1k components.
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Resources, manpower and high level of r&d required.
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Margins can touch 17-18% going forward.
My Take
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FY25 could be some 300 Cr revenue with 15% margins. PAT could be 28 crore.
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FY26 should post 350-370 Cr revenue with 16% margins. PAT could be 37-38 Cr, as expected.
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Management is very conservative on the expansion. No intent to borrow or taking orders on the expense of margins.
Note: These are my assumptions. I could be biased. It is not a buy/sell recommendation.
https://x.com/Alazyinvestor13/status/1751928796410953756?s=20
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What struck me most from their concall is Mr. Rupesh Mehta comes across as a no nonsense-no frills-straight to the point type of a personality. None of the fancy English jargons/PPT’s, just your regular next door ‘dhandhawala’.
He repeatedly emphasized, that order book is never a concern for the machine tool industry but the major challenges were skilled manpower, supply chain (component sub-vendors) and evolving technology (R&D).
The company does seem like they’ve been walking the talk, delivering good no’s and as the previous poster says Q4 is going to be a good quarter (Rupesh ji says typically the split is Q1-20%, Q2 & Q3 - 25% each, Q4 - 30%)
One thing I’m a bit cautious about is on the PSU orders. Macpower’s win rate has seen an increase ever since the introduction of the Reverse Auction mandate. Rupeshji brushed aside any margin pressures citing lowest direct costs in the industry. He also briefly touched upon how PSU clients have a stringent quality/inspection requirements (more cost) unlike private ones.
All that said, there’s every reason to feel bullish on the company. Still trying to figure out if all the Q4 numbers is already baked in the price. Would appreciate any inputs on how one would gauge it.
D : Not invested but tracking 
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Agreed on the promoter/MD. In such small caps, it is often the bet on the promoter. There seems to sufficient demand for multiple players to grow at least for the next few years.
One thing to watch for - They have been selling mostly lower end machines till now, which I assmue majority is to SME clients. This is allowing them to demand advance and manage WC very efficiently. With government/defense clients and larget private clients (as they move up the value chain), I think the WC will be impacted. Also they may nee debt for expansion. Need to keep a close eye on balance sheet, which is in very good shape today.
Going by the number of analyst meeting they are doing, looks like there is a wider interest as well.
Another point to be aware of is that this scrip lacks liquidity. One may need patience to buy as well to sell.
I have taken an approach of staggered buying - bought some before Q3 results, after confirming the business performance and outlook in Q3 added some more. After Q4, I plan to add another 25% to the position to reach the target allocation.
disc - invested from lower levels
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Have been tracking the company since a while now.
Having interacted with Rupeshbhai during Q2 con-call as well as in-person meeting, the impression surely is a clean competent promoter.
Macpower seems to be doing all the right things, the industry has strong demand due to Manufacturing and added booster from Government/ Defence orders now.
All said, I’m surely concerned about Valuations.
Looks like it’s pricing in not just the next quarter/s but much longer & faster growth.
Another major concern is the industry does have down cycle
In 2019-20, the whole industry went through one & all major players suffered
with Sales down as much as 40-50%
So the Opportunities & Risks need to be looked in a balanced view.
Usual disclaimers apply!
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Can you please elaborate on the down cycle?
As per the concall, Rupeshbhai did mention, there doesnt seem to be any lack of orders anytime soon, but concern is more on supply of skilled workers.
What may lead to a down cycle? , given the huge capex cycle in Make In India.
There is definitely a visibility of 2 years atleast.
I understand the orderbook/ India’s macro’s are very strong right now.
And the concern is not just supply of skilled workers, but also components.
One should investigate what happened in 2019-20
Make in India initiative was started long back.
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Macpower Cnc: Notes from Arihant conference
Margin levers: - Backward Integration (largest driver of margins)
Services → high valued machines + defence machines have a sizeable service component as well
Operating Costs → co to aim to reduce operating costs to 15% from current 17%+ (revolutionary in Indian mfg)
As avg realization continues to improve from 20lacs, over the next 5 years co aims to touch 25% margins!
Expansion: - Starting May, co will be on track to utilize 2000 machine capacity for production - also with additional debottlenecking co will be able to manufacture upto 2200 machines
Over the next 5 years company plans to increase capacity by 2000 machines every year to reach 10000 machines capacity in 5 years (from 1500 in FY24)
Capex: - 10cr to take current capacity of 1500 to 2000.
100cr for 2000 machines in the new set up (reach 4k machines capacity) - 15cr additional capex every year to add 2000 machines every year (depends on demand as well).
Other Highlights: - no new player in the last decade, present 6-7 players will continue to compete - Due to govt focus to take manufacturing to 25% of GDP from current 17% loans have become easy, subsidized with interest rate waivers and tax waivers → this is leading to import substitution
Very conservative management.
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